Crains New York - June 10, 2013 - (Page 5)

DIGITAL NY M&A on rise as players seek content Big media names eye NY news and video startups in quest to feed broadband beast BY JUDITH MESSINA C ontent is indeed king in technology these days, according to a new report by PricewaterhouseCoopers that pegs the race for news, video and more as one of the key themes driving tech deals and valuations this year. That’s good news for New York, which has a rich lode of such companies, some with enough scale to attract content-hungry acquirers. New York has more than 80 content companies with at least $5 million in venture capital, according to tech investment bank Gridley & Co. And while most are still young and small, the recent $1.1 billion Tumblr deal shines a light on those with well-honed brands and tens of millions of demographically desirable users—companies like BuzzFeed, Business Insider, Everyday Health and Gawker Media. “[Entertainment, media and communications] companies [are] fighting for consumers’ time and money and strategizing on the most efficient way to acquire and monetize e-content,” wrote PricewaterhouseCoopers entertainment, media and communications deals partner Bart Spiegel. Trolling for acquisitions Other content companies are also scaling rapidly, including Arkadium, a game company that attracts 10 million players a day; fashion site Refinery29, with 30 million visitors a year; and Complex Media, a group of men’s media properties that counts 45 million unique users annually. “Any companies that get scale are acquisition candidates,” said Peg Jackson, a former NBC executive and a managing director with Mooreland Partners, a Greenwich, Conn., investment bank specializing in M&A for tech companies.“In the next few years, I think you’re going to see more acquisitions.” Whether they build it or buy it, big companies are racing to acquire content that can attract and help monetize massive new audiences. The growth of broadband and the ability to access content—music, video, news, games—anytime, anywhere, on any device means that companies have to keep the content coming. Trolling for acquisitions are big media names like Turner Networks, which bought sports site Bleacher Report last year, and DreamWorks, which picked up YouTube teen channel AwesomenessTV last month, paying $33 million for it. Digital players are also on the make for content. Software maker Adobe Systems last year paid $150 million for New York’s artists’ platform Behance. Twitter bought video-sharing site Vine and, in April,LinkedIn spent $90 million to acquire news aggregation site Pulse. Still, making money on content remains a work in progress,especially for consumer-facing companies. For example, Beyond Oblivion, a New York digital music company with $87 million in venture capital and an apparently flawed business model,filed for bankruptcy last year. Desperation category Tumblr itself recently shut down Storyboard, a move that CEO David Karp attributed to the fact that the community blog didn’t work out as planned,but analysts surmised that it was a casualty of a new push by Tumblr for profitability. The Yahoo-Tumblr deal may fall more into the desperation category. Yahoo, keen to develop a younger, free-spending audience, dropped $1.1 billion to pick up a highly popular but revenue-challenged property. Other buyers, say Silicon Alley veterans, are likely to be stingier. “The biggest and best buyers are traditional media companies, and they’re not known to pay huge multiples,” said Pratik Patel, managing director and chief digital strategist for Gridley & Co. But if Yahoo succeeds in turning Tumblr into a moneymaker, it could drive the content stakes even higher. “People are going to watch very closely how Yahoo [absorbs Tumblr] into a first-generation digital media company,” Mr. Patel said. “It will shine a spotlight on how you monetize this type of scale, and as it gets proven out, it will help the entire business.” Ⅲ To sign up for Crain’s DIGITAL NY emails, go to www.crainsnewyork .com/newsletters. OUR JOB IS TO HELP MAKE YOUR JOB EASIER. When people are your priority, MassMutual’s healthcare nonprofit expertise is here to help. Whether it’s consolidating multiple retirement plans, navigating filing requirements or finding ways to help your participants retire with confidence, we simplify the process — so you and your employees can spend more time where it’s needed most. 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Table of Contents for the Digital Edition of Crains New York - June 10, 2013

SOURCE DINNER
IN THE BOROUGHS
IN THE MARKETS
DIGITAL NY
THE INSIDER
BUSINESS PEOPLE
SMALL BUSINESS
OPINION
STEVE HINDY
GREG DAVID
REPORT: HEALTH CARE
THE LIST
FOR THE RECORD
CLASSIFIEDS
REAL ESTATE DEALS
NEW YORK, NEW YORK
OUT AND ABOUT
SNAPS

Crains New York - June 10, 2013